The eight-month-old crisis, which originated in a meltdown of U.S. subprime mortgage markets, ricocheted through the global economy as securities cobbled together on Wall Street from bits and pieces of mortgage loans turned sour.
It has now has cast a pall over global economic prospects. The International Monetary Fund said this week it expected the United States to topple into a "mild recession" this year and estimated a 25 percent chance the global economy will grow by 3 percent or less, which would be considered recessionary.
TIGHTEN LENDING SCRUTINY
The outlines of the FSF's proposals, which U.S. officials said will number about 65 recommendations, are known: fuller disclosure of risks by banks, more rigid standards for credit rating agencies, measures by central banks to ensure they can effectively pump cash into the system at times of stress.
"We look forward to discussing rapid and effective implementation of the FSF findings with our colleagues," U.S. Treasury Under Secretary David McCormick said on Wednesday.
While the focus is clearly on financial-system reform, G7 ministers want to send a message that the global economy is not about to run off the rails and might tweak communique language on currencies in response to European concerns that the euro has reached new heights against the dollar.
"I deplore the excessive volatility of exchange rates," European Central Bank President Jean-Claude Trichet said on Thursday after the euro hit a record peak of $1.5912.
Past communiques also have encouraged China to speed up appreciation of its yuan currency, and the pace of the currency's rise has picked up. It crossed 7.00 to the U.S. dollar on Thursday for the first time in more than a decade.
The G7 could give a nod to the increased pace of appreciation, which is considered vital to help reduce global economic imbalances, but likely will also urge Beijing to keep the process going.
Federal Reserve Chairman Ben Bernanke emphasized in a speech on Thursday that there was an urgency about putting reforms in place to restore confidence. The U.S. central bank has pumped about $400 billion of liquidity into markets and other global central banks also have poured in cash to boost banks' willingness to lend.
"We do not have the luxury of waiting for markets to stabilize before we think about the future," Bernanke said.
